JJB Sports tries innovative deal with landlords to stave off collapse

Hopes were rising yesterday that the struggling JJB Sports chain will avoid collapse with a ground-breaking rent agreement with its landlords.

The Wigan-based chain is trying to negotiate a company voluntary arrangement (CVA) with its creditors - particularly more than 200 shop landlords - in order to stay in business. A meeting of creditors will be held in London on Monday where the retailer must secure 75% backing from them - measured by the value of cash they are owed. One JJB director said he was "cautiously optimistic".

The sports chain is on the high street equivalent of death row after a disastrous 18 months under the leadership of chief executive Chris Ronnie, which has seen it crash into the red and break banking covenants. Former Next boss Sir David Jones, aided by former Selfridges boss Peter Williams, are now trying to resurrect JJB. Ronnie has been dismissed.

The new duo's rescue plan hinges on the CVA. It has two parts: to settle the claims of the landlords of 140 closed stores, offering them partial payouts from a £10m fund; and to win approval from landlords of another 250 outlets for a move from quarterly rent to monthly payments, to help ease cash flow.

Lenders Barclays and Lloyds have agreed to keep funding the business if the CVA is approved.

CVAs are regarded as a controversial way of avoiding bankruptcy and so far no major company has escaped collapse with one. But landlords are not in a strong position, with commercial property values under extreme pressure. Some of the big institutional property investors have privately been praising JJB and its advisers for the way they have put their case.

The meeting's outcome might not be known until Tuesday, as accountants from KPMG must verify the cash value represented by each voting creditor. A JJB shareholders' meeting will then take place on Wednesday to approve the CVA.

If the creditors do not approve the deal the company is likely to go into administration straight away, putting 10,000 jobs at risk. If the meeting gives approval to the deal, there will be a one-month period for creditors that disagree to appeal.